Revenue at fast growth ICT companies averages up 36% in 2017-2020 - SPARK
MOSCOW. Sept 1 (Interfax) - SPARK-Interfax has identified the fastest growing and financially strongest information and communication technology companies in Russia in 2017-2020.
The list includes 2,134 companies, a marked improvement on 1,309 in 2016-2019 and 977 in 2015-2018. These are companies with revenue of more than 70 mln rubles and average annual growth of more than 10% in constant prices over the last three years. Their net assets have not been negative in the last reporting year, and their Financial Risk Index in the SPARK-Interfax system is "low" or "medium."
Only a handful of IT companies - around 3% - met those criteria, and less than 2% in 2016-2019. However their performance evaluation is of particular interest for the study of the market's overall potential as these companies have the best chances of survival in times of economic instability and pandemic and as a rule they develop in the most promising segments that make up the sector's business structure. Some of them are the subsidiaries of large Russian holding companies that can drive the accelerated growth of their own structures, but, as the study shows, they constitute just 5%-6% of the overall number.
Half of all fast growth ICT companies are located in or around Moscow - 47% of them in the City of Moscow and 3% in the Moscow Region. The top five also include the City of St. Petersburg with 13%, and Sverdlovsk Region and Novosibirsk Region with 3% each.
Most of the successful ICT companies are information technology companies, their share of the total reaching 86%, while telecommunications make up 14%.
The study also revealed a tendency for the accelerated growth of ICT companies as demand for information and communication technologies rose during the Covid-19 pandemic and thanks to effective support for the IT sector. This tendency slowed considerably in the period 2016-2019 compared with 2015-2018, but figures have now started to grow again: average annual revenue growth in constant prices increased from 35% to 36% in 2017-2020, operating profit from 43% to 50% and net profit from 45% to 49%.
Successful ICT companies are placing their bets on performance gains: average net profit margin reached 18.2%, compared with 13.3% in 2016-2019 and 3.5% in 2015-2018. Performance dipped slightly only in telecoms, most likely due to the need to invest more in infrastructure as many employees started to work from home. Profitability was highest in IT at 19.5%, compared with 14.5% in the previous period.
Leverage analysis shows that fast growth ICT companies achieve robust growth mainly by relying on their own funds, not by borrowing. These companies did not have net aggregate debt in 2019-2020, in other words their highly liquid assets exceeded their loans and other borrowing. Telcos alone had net debt outstanding, their net debt/EBIT averaging 2.4x, still way below the telecommunications sector average of 4.8x.
The financial state of the ICT sector in general, some 83,000 firms, has also been improving gradually. Aggregate revenue averaged up 16% to 5.655 trillion rubles in 2020 and net profit 49% to 661 billion rubles. The sector's profit margin rose from 9.2% to 11.7% and leverage decreased, with net debt/EBIT averaging down to 1.8x from 2.3x.
The full text of the SPARK-Interfax study and list of fast growth ICT companies can be found at: https://www.spark-interfax.ru/ru/articles/sektor-ikt-v-rossii-2021